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The comforts of home

Equity Release Solicitors’ Alliance chairman Claire Barker on why equity release is the answer for elderly people who want to stay in their homes

Claire Barker
Claire Barker

With increasing longevity, a growing number of older homeowners are facing the tough decision of whether or not to downsize and sell their home in preparation for older age and unpredictable health. Downsizing has always been the traditional way in which older homeowners have taken this step and bungalows are now almost synonymous with elderly comfort.

However, with the recent housing market decline and plateau, the cost savings from downsizing are now no longer as appealing as they may once have been. According to the Halifax House Price index, average house prices have decreased by 13.6 per cent in the past two years, leaving many older homeowners, especially those already living in a small home or in an expensive area, reluctant to downsize.

Aside from purely economic calculations, reluctance to downsize can also be borne from emotional and psychological reasons. Most older homeowners retain a certain sense of pride when it comes to their home, with many having worked hard to afford and create the home they aspired to in younger adulthood.

Indeed, in recent research carried out by Ersa, nearly half of the individuals surveyed between the ages of 51 and 64 have been in their home for over 20 years and they enjoy the idea of staying there for many years to come.

While downsizing may appear an appealing option at older age, in the hope of saving money and making getting around easier, often the sheer act of moving and the upheaval it can bring Barker: ’While downsizing may seem appealing, in the hope of saving money and making getting around easier, often moving and the upheaval it can bring outweighs any benefits’outweighs any potential benefits. More than three-quarters of people over 50 think the worst part of moving is packing and unpacking and releasing equity by downsizing may mean moving to an entirely new area, which could incur the loss of nearby family and social network. This whole process can be very unsettling for people as they get older.

Barker: ’While downsizing may seem appealing, in the hope of saving money and making getting around easier, often moving and the upheaval it can bring outweighs any benefits’

So, what are the options for older homeowners who have seen their property value decrease yet need to consider their future requirements?

One very real option today for older homeowners in this situation is to explore the potential for taking out an equity-rel-ease scheme and adapting their own home for older age. Equity-release plans allow people to take out a loan against the value of their property for the life of the homeowner and they present a cost-efficient way to improve an existing home while allowing independence, choice and flexibility during retirement. When the additional costs of moving, such as stamp duty, are taken into account, an option to adapt an existing home, can in fact often work out cheaper than downsizing to a smaller property.

However, further research by Ersa suggests that only one-quarter of people over 50 believe there is an easy way to equip their home with mobility devices as they grow older.

To dispel this misconception, Ersa looked at the average cost of home adaptations, including bath lifts, ramps, stair lifts and electric riser chairs and beds and found that all can be obtained for roughly £7,400. While not an insignificant sum, it is far smaller than the potential additional costs involved in moving and is a small sum to release from the average £225,224 equity built up in older homeowners’ properties.

While expert independent financial and legal advice must be sought by older homeowners looking at equity-release options, these schemes really do offer an alternative to downsizing.

The right equity-release scheme holds the potential to allow older homeowners to adapt their own home. This, in the long run, can save them the costs involved in moving which are both economical and emotional.

Remaining in your existing home prolongs a feeling of belonging to a neighbourhood and general wellbeing and for homeowners suffering from the early stages of mental illness it may even improve their chances of long-term health.

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